Making Tax Digital – HMRC’s initiative to revolutionise the taxation system and put it all online – is just weeks away from being implemented.
At Optimum, we’ve been talking about it for a long time, and are running regular information events for our business clients to explain what Making Tax Digital (MTD) is and how it will affect them.
The Government is running a media campaign to alert businesses, and accounting software providers – such as QuickBooks and Xero – are taking out TV and newspaper adverts. You may have seen the recent ones from Sage, featuring BBC Dragons’ Den’s Peter Jones.
But despite the publicity, it seems many business owners are still unsure of what MTD is, and whether it applies to them. The quick answer is, yes it will apply, if not immediately then as the roll out continues.
So here is our handy guide to MTD, which will come into force for qualifying businesses from April 1.
From April 1, VAT registered businesses, with a turnover above the £85,000 VAT threshold, will need to start submitting their VAT returns via MTD for VAT periods starting on or after April 1.
Businesses with a taxable turnover below the VAT threshold can also voluntarily sign up for MTD for their VAT returns.
If a business’s taxable turnover drops below the VAT registration threshold at any point after April 1, they are still required to continue to keep digital records and send HMRC the VAT returns using MTD-compatible software. This obligation doesn’t apply if they de-register from VAT or if they are exempt from MTD for VAT.
These business can still sign up for MTD voluntarily. Businesses can also sign up for MTD for Income Tax.
From 2020, the current plan is that all businesses will be drawn in. Ultimately, all tax returns, not just those for VAT, will need to be submitted quarterly through MTD.
There some exemptions from MTD. These include:
But for by far the majority of businesses Making Tax Digital cannot be avoided. If you run a business now is the time to act, to ensure you and the software you use are fully compliant.
If you have any concerns or queries about Making Tax Digital, how it affects your business and how we can help please get in touch with our tax specialists.